General Guideline

Value-Added Tax (VAT) In exception of cases which stipulate particular transactions in connection with suspension of tax, non-entitlement of tax or even the zero-rated ones on goods supplies mentioned within the scope of defined goods and other goods related to Zone activities from mainland to the Zone, and in connection with the goods supplied within the range of the Zone, the VAT shall apply to any supplies in connection with the Zone according to the standard rules. For instance, supplies of services (19), from person subject to tax in the mainland to established entities in the Zone, shall be subject to VAT as usual. The same shall be applied on the supplies of services from an established entity in the Zone registered for VAT to the Service Recipients whether inside the Zone or the mainland. Meanwhile zero rate shall be applied on supplies of services from an established entity in the Zone registered for VAT to any customer outside the Kingdom in accordance with the provisions under the Article Thirty-Three (33) of VAT Implementing Regulations. Further, the VAT shall apply to goods supplies that are not related to the licensed activities in the Zone in accordance with the standard rules, given that those given activities are not subject to the provisions of tax suspension and custom duties that apply to an established entity in the Zone by taxable person in the mainland or in the Zone. (19) A supply of services is any transaction that does not constitute a supply of goods under the provisions of the Unified VAT Agreement. For further reference, see Article 14 of the Implementing Regulations of the VAT Law. Supply of goods in the Zone In case of supplying goods, related to the licensed activities, from an established entity to another (without moving them out the Zone), thus it shall be placed free of custom duties and VAT i.e. under suspension status, as it is considered out of the VAT scope in accordance with the provisions and procedures set out in the tax and customs laws and regulations. The previously mentioned supplies shall not be subject to the VAT and out of the scope thereof, under the fulfilment of the following two conditions: 1. The goods shall be placed free of customs duties (under suspension status) inside the Zone in accordance with the provisions and procedures stipulated under the Common Customs Law. 2. The goods shall be related to the licensed activities by an established entity in the Zone. In case that the person who is supplying the goods according to the conditions mentioned above is subject to the VAT and registered with the Authority for VAT purposes, the previously mentioned supplies, then, shall be considered as a zero rate, which enable the given person to refund the paid VAT on those supplies based on the regular Tax Returns filed to the Authority. Meanwhile, the supplies of services to the Zone and supplies of goods that are consumed/used within the Zone for purposes other than the activity licensed by the competent authority shall be subject to tax. In the event of supplying both goods and services together at a unified price, the value of the services shall be determined separately and the VAT shall apply at the basic rate, with exception to the cases where the value of services cannot be separated from the value of the good supply, in which cases the basis of the supply shall be calculated on the supply of goods, such as the basic warranty service associated with the supply of a good to which that warranty applies.